Pizza Pizza Royalty (PZA) Q3 2024 earnings summary

Executive summary

• Same-store sales declined 5.3% in Q3 2024, with Pizza Pizza down 5.9% and Pizza 73 down 1.5%, driven by reduced consumer spending and increased competition, especially in delivery channels.

• Consumer behavior shifted toward pickup orders, with value-focused promotions and menu innovation supporting engagement.

• New value offerings, such as the XXL pizza and All-for-One Special, were well received, supporting traffic and brand visibility.

• Restaurant network expanded by 33 new locations year-to-date, offset by 19 closures, resulting in a net increase of 16; Q3 saw a net increase of 6.

• Adjusted EPS fell 6.3% in Q3 and 2.3% year-to-date; basic EPS decreased 6.4% in Q3.

Financial highlights

• Royalty pool system sales for Q3 2024 decreased 4.6% to CAD 155.8 million from CAD 163.2 million year-over-year.

• Royalty income declined 4.4% to CAD 10 million for the quarter.

• Q3 adjusted earnings available for shareholder dividends: CAD 5.3 million (down from CAD 5.9 million in Q3 2023).

• Shareholder dividends declared were CAD 5.7 million (CAD 0.2325 per share), payout ratio 109%; YTD dividends: CAD 17.1 million (CAD 0.6975 per share), payout ratio 113%.

• Working capital reserve at CAD 6.3 million as of September 30, 2024, down from CAD 8.2 million at year-end 2023.

Outlook and guidance

• Focus remains on value leadership, menu innovation, and digital experience to drive recovery into 2025.

• Management expects to grow the traditional restaurant network by 3-4% and continue renovations through 2024.

• Continued expansion in Ontario, BC, Quebec, and Mexico expected, with more openings planned.

• Anticipates higher interest rates on upcoming credit facility renewal in 2025.